As part of Ford’s renaissance, they have been cutting costs and pumping money into research and development (R&D). It started in 2007, when current CEO Alan Mulally was hired. He immediately leveraged part of Ford in order to get $4 billion in operating costs, which he then sunk into R&D to bring Ford’s car offerings up to par with their foreign rivals.
The fruits of those labors are coming to fruition, with Ford’s Fusion taking Motor Trend’s Car of the Year award for 2010, and many other Ford cars being received well by American consumers. Another thing Mulally did was to begin selling off underperforming brands that Ford owned. First, Aston Martin was sold to a British conglomerate, and then Land Rover and Jaguar were sold to Tata Motors, an Indian company. Ford then sold its controlling interest in Mazda, and Volvo went up for sale.
Geely, a Chinese automaker, stepped up with a bid to buy Volvo. The problem that has been plaguing the deal is intellectual property: Ford currently shares a lot of the hardware between its Volvo and Ford vehicles. If Ford sells Volvo, the new owner would automatically have the underpinnings to a lot of Ford vehicles. Negotiations have been going on between Ford and Geely for some time now, and this morning it was announced that they had come to an agreement for the intellectual property.
The agreement states that Geely will get any technology that is exclusive to Volvo, but anything shared with Ford will not transfer. This protects Ford, while still giving Geely the base they need to continue production of Volvo vehicles.
What does this mean to us, as American consumers? It gives Geely a way into the US auto market. For some time now, Chinese automakers have been looking to sell their cars here, but have been unable to meet environmental and safety regulations. I believe that our marketplace is already saturated and we really don’t need any more sellers. Car sales in 2007 were over 13 million vehicles, but since then, sales have been declining. Even with the Cash For Clunkers program, sales in 2009 are still not above 10 million. I just don’t think that the market can sustain any more automakers than what are already here. Also, the sale of Volvo is not good for Ford. Even though Volvo sold 73,078 vehicles in the US in 2008, a fairly low number, the safety features and platforms that Volvo has been developing have made their way into Ford’s vehicles, the latter underpinning the Lincoln MKS and 2010 Ford Taurus. While the Lincoln is a niche seller, the Taurus has been well-received so far, and should sell well. I have a feeling that Ford will want whatever Volvo develops to succeed the Taurus’ platform, and selling them off will only make things more difficult. As always, time will tell, but I hope that Ford isn’t making a mistake by selling Volvo.
by John Suit
Source: Automotive News